Observers described it as an economic suicide ... Is Algeria going back on free exchange with the European Union?

Abdel-Hakim Hadaqa-Algeria

Fifteen years ago, at the height of high oil prices, Algeria signed the Association Agreement with the European Union, and one of its main axes is the freedom of movement of goods.

The goal announced in 2005 was to promote non-hydrocarbon exports to Europe and to encourage European investment in the country, and to help them carry out economic and administrative reforms, not to mention the transfer of technologies aimed at improving the national product.

The customs dismantling agreement between the two parties is expected to lead to the establishment of a free trade zone in early September, after being postponed three years in 2017 at the request of Algeria, in order to give the opportunity to the national institutions to qualify and compete.

In terms of numbers, the European group is the most important trading partner with Algeria, as exports towards it during the first nine months of 2019 amounted to nearly $ 17.2 billion, compared to imports of $ 17.7 billion, according to what the Customs Administration revealed.

However, a study by the National Foreign Trade Promotion Agency, a public body, on the effects of the agreement from its entry into force in September 2005 to 2015, revealed significant imbalances in favor of the European side.

She emphasized that Algerian exports outside of hydrocarbons did not exceed 14 billion dollars, compared to imports in the range of 220 billion, during the same period mentioned. Thus, in 2015 the government announced the launch of an in-depth evaluation of the terms of the partnership with the European Union.

Today, and only seven months after the free trade agreement came into effect, the voices of experts rise by warning against Algeria's "economic suicide" in light of the decline in fuel prices and the hard currency reserves from two hundred billion dollars to seventy billion dollars in addition to the lack of preparedness of Algerian exports.

In a previous interview with Al Jazeera Net, President Abdel Majid Taboun, in his capacity as a presidential candidate, pledged to review all the agreements that did not serve Algerian interests.

Therefore, the question now arises, according to observers: What can Algeria do to break the agreement or at least ease its terms? How is the Europeans expected to deal with Algeria's demands?

Compliance contract
In this regard, former Minister of Trade Hashemi Jouboub said that the agreement came in a difficult circumstance, as Algeria was living through the repercussions of a serious security and social crisis, due to the years of fighting and the regime's loss of popular legitimacy.

Europe took advantage of these conditions and the rush of (former) President Abdelaziz Bouteflika to search for media glory, under the pretext of breaking the international isolation from Algeria, to impose the formula of the agreement without any amendment, and without consulting neither the dealers, the university, nor the specialists, so it came in the form of a contract of compliance.

In a statement to Al-Jazeera Net, Jaboub explained that the gradual dismantling of customs duties encouraged a large increase in the volume of European imports, which caused great financial damage to the public treasury and national production, which was unable to enter the European Union markets, due to its weak competitiveness and due to the measures imposed by the other party.

And it turned out, after ten years, Djaboub adds - that Algeria did not gain anything from this agreement, rather it hurt its economy and formed the main obstacle in its bid to join the World Trade Organization, since its members are demanding to benefit from the same customs exemption granted to the European Union, which necessarily leads to the loss of All customs revenues for Algeria.

He attributed the main reason in this situation to the great disparity between the economic sector of the countries of the Union and its Algerian counterpart, as well as the failure of the Union to fulfill its obligations to assist the Algerian economic institutions, contented with the increasing flow of its products to the Algerian market.

Cancellation
On the work available to Algeria in the face of this dangerous situation, Djaboub put forward several scenarios, including accepting the resulting economic losses that are certain, in exchange for false moral gain, as a country that respects the agreements it has signed.

In the second case, it is assumed that rejecting the fait accompli and demanding a deep review of the agreement in a way that preserves the interests of the two parties, but it is almost impossible, given the great variation in the economies of European countries compared to Algeria, as he put it.

The former Minister of Commerce called on his country's authorities to show courage and patriotism and go to cancel this agreement, in exchange for replacing it with general trade rules, as it exists with other countries, and withdraw the customs concession granted under the pressure of the previous exceptional circumstances of Algeria.

Commitment
On the other hand, the former Minister of Trade, Mostafa Bin Bada, believes that Algeria can only adhere to the agreement to preserve its political reputation and credibility as a country that fulfills its obligations, especially in the circumstances the country is currently undergoing.

However, he called for a review of the terms of the agreement, through new negotiations that guarantee a greater balance of interests between the two parties, especially since the European side violated several obligations, including investments that did not arrive, and support for exports outside of hydrocarbons and others.

Bin Bada explained that the ministry’s mandated foreign trade program recently presented to the cabinet includes the evaluation of regional agreements, including with the European Union.

He revealed that a cross-sectoral working group will start its work in the next few days, to define the parameters of the evaluation and the goals expected of it, according to information it possesses.

He expected the Europeans to resist Algeria's efforts to review, because they would lose important privileges if they occurred, and they could use against them political or economic pressure papers such as the gas file.

The former minister concluded by saying that the concern for common interests nominated a compromise solution that might satisfy both parties.